Betting on US Federal Election Results Prohibited

by Warren Seah

The outcome of the upcoming federal elections in the United States may be uncertain, but one thing is clear: Americans will not have the legal option to place bets on the results.

In a recent announcement, the Commodity Futures Trading Commission (CFTC) disclosed that it has rejected an application from KalshiEX LLC, an exchange, to introduce “event contracts.” These contracts were designed to provide payouts to investors who wagered on which political party would control the House and Senate in the aftermath of the 2024 elections.

CFTC Chairman Rostin Behnam emphasized that federal regulations mandate a thorough assessment of such proposals, taking into account potential violations of state laws and evaluating their alignment with the public interest. In this case, Kalshi’s application failed to meet both criteria.

Kalshi did not provide an immediate response when approached for comment.

Kalshi and the Regulation of Event Contracts in the U.S.

Kalshi is not the first company to venture into offering regulated event contracts to U.S. investors. PredictIt, a New Zealand-based platform, previously provided such contracts under a “no action” letter granted to Victoria University of Wellington. This arrangement allowed researchers to study the effectiveness of prediction markets in event forecasting.

However, the Commodity Futures Trading Commission (CFTC) rescinded the no-action letter last year, leading to PredictIt’s cessation of issuing political contracts in the U.S. in February.

Polymarket, a New York-based company, encountered similar regulatory challenges. In January of last year, the CFTC settled charges against Polymarket for offering event contracts without registering with the commission. As part of the settlement, Polymarket paid a hefty $1.4 million fine. Although the company no longer offers contracts to U.S. customers, it continues to operate in other jurisdictions worldwide.

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